What: Major Japanese department stores report March sales declines ranging from 0.8% to 1.6%, driven by reduced tourist spending and weather-impacted seasonal merchandise performance.

Why it is important: The simultaneous impact of reduced tourist spending and weather-related challenges highlights the vulnerability of department stores to both international market dynamics and local seasonal factors.

Japanese department stores are experiencing a notable shift in their post-pandemic recovery trajectory, with major retailers reporting declining sales in March 2025. Isetan Mitsukoshi Holdings recorded the steepest decline at 1.6%, followed by Daimaru Matsuzakaya Department Stores at 1.2%, while Takashimaya saw a more modest decrease of 0.8%. The downturn is attributed to two primary factors: a significant reduction in tax-free sales, indicating decreased spending by international visitors, and poor performance in spring clothing sales due to unstable weather conditions. Tax-free sales, a crucial indicator of tourist spending, showed concerning declines, with Takashimaya experiencing an 11.5% drop and both Isetan Mitsukoshi and Daimaru Matsuzakaya reporting approximately 4% decreases. This performance marks a notable contrast to the sector's previous strength, suggesting potential challenges in maintaining the momentum that drove record-breaking sales throughout 2024. 

IADS Notes: The March 2025 sales decline reported by major Japanese department stores reflects a significant shift from the robust performance seen throughout 2024, when the sector achieved record-breaking duty-free sales of YEN 648.7 billion. While January 2025 showed promising growth of 5.2% year-on-year, the current downturn, particularly in tax-free sales (declining 4-11.5% across major chains), signals a potential cooling of the tourism-driven boom. This trend aligns with October 2024's observations of weather-sensitive domestic sales, where unseasonable conditions impacted seasonal merchandise performance. The varying performance among major chains continues to highlight the growing divide between urban and regional locations, a pattern that emerged strongly in late 2024 when major city stores grew 9.1% while regional locations declined 0.5%. The expansion of tourist purchases beyond luxury goods, noted in the current report, builds upon the sector's transformation documented in November 2024, suggesting a more complex and challenging retail landscape ahead.

Major Japanese department stores post lower sales in March